Standing Committee E

[Mr. John Maxton in the Chair]

Health and Social Care Bill

Clause 2 - Payments relating to past performance

Amendment proposed [this day]: No 67, in page 3, line 5, at end insert— 
 `(3CC) The Secretary of State shall within 28 days of notifying objectives or criteria to Health Authorities publish details of them as— 
 (i) objectives to be met in performing their functions; and 
 (ii) criteria relevant to the satisfactory performance of their functions 
 together with details of the methods of measuring their performance against those objectives and criteria which he will use in assessing them for payments of further sums to them in accordance with subsection (3C) above.'.
 Question again proposed, That the amendment be made.

John Maxton: I remind the Committee that with this we are taking amendment No. 68, in page 3, line 5, at end insert—
 `(3CC) The Secretary of State shall publish annually a report detailing, in respect of each Health Authority to which he has made payments under subsection (3C) above— 
 (a) the objectives notified to that Health Authority under (3C)(a) above; and 
 (b) the criteria notified to that Health Authority under paragraph (3C)(b) above; and 
 (c) the methods of measuring their performance which he has used in assessing them for payment of further sums in accordance with subsection (3C) above; and 
 (d) his assessment of their performance against the objectives notified in accordance with paragraph (3C)(a) above and the criteria notified in accordance with paragraph (3C)(b) above; and 
 (e) the further sums paid to them in accordance with subsection (3C) above.'
 Perhaps it would be convenient for the Committee if I let right hon. and hon. Members know that I intend breaking for dinner at 7 pm and resuming at 8 pm. However, that is flexible and if it appears that we can finish today's business within a reasonable time scale—15 or 20 minutes—we will continue until we have finished.

John Denham: Before lunch, the hon. Member for Runnymede and Weybridge (Mr. Hammond) made several points about the amendments, which are essentially concerned with the publication of information. He made further points about the two-week waits for cancer patients and the financial element in the performance assessment framework. We are moving the NHS on to a much sounder basis of performance assessment, as promised in our manifesto, so that all issues of interest to the patient are considered. We criticise the previous Administration because they focused on financial matters to the exclusion of clinical or patient issues.
 Right hon. and hon. Members who have had an opportunity to look at the consultation document that we circulated last week will have seen the indicative spider diagrams at the back of that document. They illustrate how different types of performance can be taken into account in assessing health organisations. They show how health outcomes, health improvement, fair access to services, effective delivery of appropriate care, efficiency and the experiences of patients and carers can all be taken into account in judging the progress of individual organisations. 
 That is an important element in the performance framework that we are setting out for the NHS. We are consulting on the detail of that with the paper that was published last week. It is right that financial performance should be considered, but it should not be the only criterion. That is the big change that we have made, as compared with the previous Administration. 
 The introduction of the two-week cancer referral target was an important first step in improving the speed with which patients move through the system. I am sure that the hon. Gentleman will recognise that the national cancer plan, which was drawn up last autumn, took us much further forward. We are focusing on the whole process of treating cancer patients—not just on the point of referral, but on the point of treatment, and we are setting targets. That work—led by the national cancer director, who is a leading clinician, with the support of experts from across the field—has been widely welcomed in the health service as laying the basis for better cancer services in future. We have also taken that approach in other clinical areas. 
 We are laying down, year on year, an increasingly robust framework for performance assessment. It is true that, at the moment, we do not have all the information that we would like to be available for assessment, but every year more data is collected and published than ever before about the performance of the NHS and individual organisations. That is the background to the two amendments. 
 Amendment No. 67 would require the Secretary of State to publish details of the objectives, criteria and methods of measuring the performance of health authorities within 28 days of notifying them to health authorities. The amendment is unnecessary. First, health authorities are already informed of their objectives for each year in a letter that sets out the priorities for the year ahead, which is publicly available. 
 Secondly, anyone can request details of individual health authority objectives for the year. As I said earlier, the precise method of measuring health authority performance against some criteria may not be notified to health authorities at the same time as the criteria. I shall not repeat the arguments advanced in earlier debates.

Philip Hammond: Is the Minister saying that the Secretary of State will notify objectives or criteria to health authorities only at the time of the annual letter? Will there be no opportunity for him to issue additional criteria or objectives at a later date?

John Denham: I am not saying that the only opportunity to indicate how performance may be measured is at the time of the allocation. The clause allows flexibility for in-year performance to be taken into account. Health authorities may need to be notified of the criteria to be taken into account, but in some circumstances it will not be possible for the exact measurement of those criteria to be made simultaneously or necessarily within the 28-day period in the amendment.

Philip Hammond: I accept what the Minister said, but a few minutes ago he said, in effect, that the amendment was redundant because health authorities would be notified of the criteria in writing. Is he saying that the Secretary of State will not issue supplementary criteria or objectives? The amendment was designed to take account of circumstances in which the Secretary of State, under the terms of the clause, may wish to issue supplementary, in-year criteria or objectives. Is the Minister ruling that out?

John Denham: No, I cannot rule out that possibility. The hon. Gentleman is right to say that it might be necessary.
 Amendment No. 68 would require the Secretary of State to publish annually details of the objective criteria and the method of measuring the performance of health authorities, his assessment of their performance and the further sums paid to them. We could not accept the previous amendment on the basis of policy and we reject this amendment because there is no need for it. The NHS plan set out proposals for the annual publication of the results of performance assessment; it forms the basis of the health authorities' objectives and the measurement of a variety of indicators. Publication will be the responsibility of the Commission for Health Improvement, in association with the Audit Commission. The Commission for Health Improvement will have a role in validating the traffic-light system to prevent the arbitrary allocation of individual trusts to a particular level in that system. 
 The performance assessment framework will show how each health authority and NHS trust performs during the year and present a comprehensive picture of its overall performance against its objectives for the year and against other indicators. Publication by the Commission for Health Improvement will show the public that the assessment results are genuine and independent. The amount that a health authority receives from the performance fund each year will be in the public domain and available on request.

Philip Hammond: If the amendment were accepted, there would be a single-source document stating the criteria set, the measurement methods, the Secretary of State's assessment and the payment made. It would thus be possible to compare health authorities and to judge how they performed against common criteria and objectives. The amendment would ensure that such information was readily available; there would be a level playing field and health authorities would have even-handed treatment.

John Denham: The information necessary to assess the operation of the performance fund, the distribution of funds and the assessment of criteria will be in the public domain and enable that exercise to take place. The Government have no intention to deceive about the process and we are not convinced of the need to adopt the amendment. I believe that the information will be available. However, I will consider the points that the hon. Gentleman has made, to make sure that the assurances that I am giving him are correct.

Philip Hammond: On amendment No. 67, the Minister has accepted the possibility that the Secretary of State would wish to issue supplementary criteria, or objectives to a health authority. He said that the Government had no wish to conceal anything, but would it not be possible—in the absence of amendment No. 67—that people who had a business to know would not be aware of the criteria to which a health authority was working, if the Secretary of State had issued supplementary criteria, and they were not contained in a published letter? We are asking for an assurance that whenever new criteria or objectives are set, they immediately become public information, so that everyone understands what is driving a particular health authority.

John Denham: Again, I am happy to reflect on that. The hon. Gentleman makes a reasonable point. There are good reasons to resist tying organisations down to specific timetables. The hon. Gentleman was wondering what circumstances one might have in mind, so let us take an example. Last year, the Government set an in-year objective of achieving a 60 per cent. immunisation target for the over 65s. That was not linked to any performance system—other than there was a service payment for GPs to carry it through. It is conceivable that the Government might have chosen a different means of incentivising that, perhaps through a payment to health authorities. That hypothetical example—which is not one that we have considered nor do we have plans to do so—would be a case of a criteria and target being set in year with the exact way of assessing performance being made public somewhat later.

Paul Burstow: The Minister's example of the immunisation programme is quite unfortunate as it took me the best part of two months to get a written answer about the extent to which that programme was successful. That reflects the concern of the hon. Member for Runnymede and Weybridge about getting information into the public domain at the earliest opportunity. Would the Minister consider ensuring specifically that community health councils and their successor bodies are notified of changes in year to objectives and criteria? Clearly, as the local agency for evaluating the performance of the NHS, from the patients' perspective, they need to know.

John Denham: Those are perfectly fair points. I have tried to give reasons why the wording of the amendments would not be acceptable. Clearly a patients forum would need to know what is driving a trust or health authority, or setting its priorities. Our intention is that supplementary letters would be publicly available in the same way as the annual letter to the health authority is available. I will go back through the system to assure myself, the Committee and, if necessary, the House, that the information will be in the public domain. I am sure, however, that that would be the case under our normal proceedings.

Philip Hammond: I am grateful to the Minister for the tone of his response to these amendments. They are intended to allay concerns that the Secretary of State is acquiring considerable powers, which could be exercised to mean that, in time, a larger proportion of total health funding would be distributed on a discretionary basis, instead of through formulae. Although we complain about them, we accept that the calculations are done by officials and are neutral. We are attempting to ensure that the way in which the Secretary of State operates these funds is transparent, and that he is therefore accountable for his actions. Can the Minister reassure the Committee that it is his intention that all health authorities are set the same criteria and objectives? It will then be possible to see an objective or a criterion set, the performance of different health authorities in achieving it, and the payments that are then made to them.
 Will the payments be flat rate—so that each authority that meets the objective gets £10,000—or related to the authority's weighted capitation payments under the formula? Will the payments reflect the broader needs of an area, or will they be at the Secretary of State's discretion? If it is the latter, I believe that there will be considerable concern about very large sums being dispensed on the basis of the achievement of objectives or criteria that may differ between health authorities. If the Minister can clear up those questions, we will have made a fair amount of progress.

John Denham: Although I have some sympathy with what the hon. Gentleman is saying, it is important that we do not use the clause to attempt to rewrite the entire basis of the National Health Service Act 1977. As I said earlier—when I think the hon. Gentleman was briefly absent from the Room—the clause gives considerable discretion to the Secretary of State to consider a broad range of factors in deciding what allocations are made to health authorities. The clause relates specifically to the ability to make performance-related payments and, even more specifically, to making payments related to performance in any particular year.
 The entire debate has been based on the premise that the criteria for measuring performance will be published, and we have discussed the timing of the exact measurement of those criteria. Therefore, it follows that there will be published criteria, but it would be irresponsible to go from this narrow provision to making fundamental statements about the whole system of laws surrounding health authority allocations. In the context of the clause, it is our intention that there would be published criteria for making awards.

Philip Hammond: I am grateful to the Minister. He has said that the same criteria are applicable to all health authorities, and that they are not separate criteria negotiated and agreed with different health authorities. Will he also answer my question about payments?

John Denham: It would be possible under the clause for the Secretary of State to set specific objectives for individual health authorities. Under the current system, several health authorities receive additional funds through a competitive process to implement health improvement plans aimed at reducing coronary heart disease. The funding of those plans is dependent on achieving objectives. The clause might allow in-year performance to be taken into account for those individual health authorities. Thus, as part of this process, it must be possible to identify specific criteria for individual health authorities—and I assure the hon. Gentleman that it would be an open process.

Philip Hammond: I appreciate the Minister's tone in his earlier remarks. However, partly by what he said, and partly by what he avoided saying in relation to the payments, he has reinforced my worst fears that the intention of the clause is to enable the Secretary of State to approach health authorities and—under clause 3 trusts and primary care trusts—effectively negotiate bilateral deals with them relating to specific aspects that are relevant to them. That is not to say that specific aspects might not need to be covered in one trust and not in another, but I am sure that the Minister will appreciate the accountability anxieties involved in moving to a method of funding the NHS that essentially involves the Secretary of State in a series of bilateral contracts with NHS providers, negotiating deals with them. Perhaps, for example, two trusts might be set similar criteria but paid different amounts if they achieved them. Perhaps the two trusts might be set different criteria. Although that may make sense in some cases, in terms of a public accountability framework, a public spending programme and the demands of equity of access and treatment in services such as the NHS, it might be difficult for the Government to sustain in practice, and it gives me considerable cause for concern.

Hilton Dawson: I have some sympathy with the hon. Gentleman's amendment, but does he not agree that he would be on much surer ground with the line that he is trying to take if his party recognised poverty as a major cause of ill health in this country?

Philip Hammond: The hon. Gentleman makes a point that the funding formula recognises. As I said a few moments ago, we all recognise that the funding formula is not perfect, but at least it takes into account in a formulaic way different circumstances. What is now being proposed is that a part of the budget of health authorities and trusts will not be subject to such a formula, but will be subject to bilateral negotiations with the Secretary of State—because inevitably that is what it will boil down to—on achieving what may not necessarily be clinical criteria, but whatever criteria the Secretary of State wants to impose. That seems a rather retrograde step that I should have thought would give the hon. Member for Lancaster and Wyre (Mr. Dawson), as well as Opposition Members, some cause for concern.
 I was hoping for an assurance from the Minister, because the tone of his earlier remarks suggested that the process would be across the board and that we would be discussing trusts having to reduce their waiting lists by 10 per cent., for example, in order to receive a payment of x. As a result of our debate so far, however, it is not clear whether the Secretary of State would be able to impose different values for x on every trust and that trusts would receive different sums of money by way of reward if they achieved those targets. 
 In the absence of a formula, such a system is open to abuse. We are making legislation not only for the present, but for the future, and I do not want a system to develop that gives politicians ever greater discretionary control over large areas of funding. At the moment we are dealing with relatively small amounts. However, let us consider personal social services spending, a subject on which the Minister asked me a question at the Dispatch Box a week or two ago, so he obviously knows a lot about it. 
 We have seen a dramatic growth in the proportion of total personal social services funding, which is funded through ring-fenced grants allocated by the Department of Health and bid for by social services authorities. Can the Minister confirm that it is not the Government's intention to place increasing amounts in funds allocated on the basis of performance and meeting criteria and objectives? Everything that I have heard from the Government suggests that that is part of their agenda. It may not be wrong, but it means that an increasing sum will be allocated on the basis of performance. We are merely seeking to ensure that the allocation mechanism is fair and not vulnerable to political manipulation—political with a capital ``p'' and with a small ``p''. We want the allocations to be fair and transparent, in what I might call—in an old-fashioned way—the best traditions of British public finances. I do not feel that the Minister has given us that reassurance. 
 I am, however, grateful to him for agreeing to consider the thinking behind the amendments. The wider concerns that I have expressed go beyond the amendments to the broader operation of the clause. Therefore, in anticipation of what the Minister has to say when he has had a chance to explore that thinking, and in the hope that we may discuss the matter further in the clause stand part debate, I beg to ask leave to withdraw the amendment. 
 Amendment, by leave, withdrawn. 
 Question proposed, That the clause stand part of the Bill.

Philip Hammond: I shall not try your patience, Mr. Maxton, by going over ground that we have covered previously. The clause develops the process of centralisation and the potential for micro-management of the service. We all know that he who pays the piper calls the tune. If the Secretary of State has large funds at his disposal—especially if they are to be dispensed in a discretionary fashion, which was the import of the previous debate—throughout the service there will be an ethic of doing what the Secretary of State wants. That may not always be the right thing to do in the view of the clinicians working within the service, and it may not reflect local priorities, which, at one stage, under the Secretary of State's predecessor, the right hon. Member for Holborn and St. Pancras (Mr. Dobson), the Government were anxious to emphasise.
 The clause will have two practical effects. First, it may distort clinical priorities, as health service managers focus their budgets on achieving the criteria that have been set. This morning, I quoted an example from a health authority in just such a situation. That will lead, in some cases, to the sickest patients not receiving the highest priority within the service, which in our view would always be wrong. 
 Secondly, the traffic-light system—the identification of a group of trusts as failing—will lead to a further decline in staff morale. In a minute, I will ask the Minister again, for the third time today, how many trusts he expects to be categorised as red. It is inconceivable that his Department does not have an idea of how many health authorities and trusts are likely to qualify as red in the initial appraisal. I have talked to people in health authorities who know jolly well that those authorities will qualify as red. 
 That will have an effect on staff morale and the recruitment of clinical staff, nurses and doctors. It may have an even bigger effect on the recruitment of management. Who would want to enter an organisation that is publicly recognised as failing? Typically, in private enterprise, when an organisation is in that position, one would expect people to be brought in to turn it round and to be paid at premium rates. Indeed, in the public sector, in the case of the dome, the Government discovered that it was necessary to pay people premium rates to sort it out when it all went wrong. 
 It might appear perverse to increase the salaries of managers in failing trusts as against those in successful trusts, but without that incentive it is unlikely that top-flight managers will be attracted to a much more difficult and potentially thankless task in a failing trust rather than staying in a successful green-light trust. 
 Although much has been written and talked about the likely location of the failing health authorities and trusts that will get the red light, they will not always be in areas of deprivation. It is likely that quite a lot of those trusts and health authorities will be in deprived areas, for the reasons that the hon. Member for Lancaster and Wyre outlined earlier, but it is also the case that on most of the criteria set out in the consultation document, my own health authority in west Surrey, which is not noted as a deprived area, would probably be classified red under the Government's current proposals. That is because of its serious financial problems and the consequent underperformance in many areas, as it attempted to achieve the financial targets that were imposed upon it. 
 Under the Government's proposals, health authorities and trusts will find themselves veering from one direction to the next as they attempt to meet the Government's criteria. Clinical lead times are relatively long, and I fear that the Government will change the criteria that they ask health authorities and trusts to follow with rather more frequency than might be ideal for the efficient operation of the service. 
 Let me ask the Minister some specific questions that have not been covered so far in the debate on clause 2. Can he confirm that the grading of health authorities and trusts into red, yellow and green categories will always be as a result of a Commission for Health Improvement evaluation that is carried out on a transparent basis, and not as a result of a discretionary decision by the Secretary of State? Will there be any appeal mechanism for a trust that believes it has been unfairly or inappropriately categorised to institute a review of its categorisation? 
 As our amendments Nos. 67 and 68 were rejected, will the Minister give us an assurance that, by one mechanism or another—the hon. Member for Sutton and Cheam (Mr. Burstow) suggested some form of statutory notification of the local oversight bodies and we have suggested a requirement to publish—the workings of this whole process will be open and available to public scrutiny at the time, so that the date of the information will be available? Finally, will he tell us how many health authorities and trusts the Government expect there to be in the first wave of red-light allocations? Will there be tens or hundreds? Clearly, it will not be hundreds of health authorities, as there are not hundreds of health authorities, but a clear indication of the numbers would be extremely helpful. 
 The Government told us that competition in the NHS was destructive, yet this model will promote competition between health bodies, encouraging them to vie with each other for the coveted green lights. It will not lead to a model of health service provision that is more focused on patients, but to one that is more focused on doing the Secretary of State's immediate bidding. It will not encourage NHS staff to feel comfortable in their surroundings, and despite the Minister's rhetoric, there are no provisions that will obviously encourage co-operation between NHS bodies. Indeed, it will have precisely the opposite effect. 
 In my view, the clauses under consideration today do not provide adequate accountability for the increasing sums that will be distributed by the Secretary of State on what appears to be a discretionary basis. While we accept the principle that some allocation of funding on the basis of performance is sensible, we should have grave concerns about the wording in the Bill and the absence of any proper checks and accountability mechanisms for the large sums of money that will be at his disposal.

Paul Burstow: I want briefly to pick up a couple of points that my hon. Friend the Member for Isle of Wight (Dr. Brand) touched upon and to develop one or two others that occurred to me as I listened to the debate. I should explain that my hon. Friend is in the Chamber taking part in the debate on the Shipman inquiry. While the performance management system is entirely right for a managed system such as the NHS to develop, we must be careful about the language that we choose to use within that system as it inevitably leads to a great deal of interest in looking for and emphasising failure.
 I am not arguing that we should not seek to improve the performance of those who are not delivering the best health outcomes, but we should be aware that our actions can lead to a downward spiral in terms of lower motivation and ultimately, as my hon. Friend said earlier, to a lack of additional resources to address the reasons for the failure of performance. We must not proceed along a path that simply turns this into a question of how many authorities will be in the red-light zone, which in turn will be the headline in the next edition of the Daily Mail. The system should not just punish failure, but should drive up the quality of services. Some of the comments so far imply that our aim is to punish failure.

Philip Hammond: Any Government, of any colour, will have a political imperative to ensure that the number of green-light organisations rises while the number of red-light organisations falls. No Government will want to admit that during their tenure of office the number of red lights doubled and the number of green lights halved.

Paul Burstow: The hon. Gentleman's helpful intervention leads me on to my next point—I am not sure whether he managed to ask the Minister about this. What lies behind the idea that we need to have fixed proportions, at least initially, within the various colours of light: green, amber and red? It would be far better to base them on merit, rather than on an initial assumption. Given that the Department has already collected most of the data that forms the basis for the criteria and the objectives, has it run the criteria against the existing data? If so, will it at some point publish that information as I am sure that it could inform our deliberations, and it would certainly be helpful on Report and in the other place?
 Finally, who will collect the data, how will it be analysed and who will present it? The Minister referred to the central role of the Commission for Health Improvement in the process. I felt that he was arguing that CHI would give the process a degree of transparency and independence from inappropriate ministerial interference. Can the Minister say a little more about the collection of the data? Will it inform the process and enable assessments to be made? Will CHI take that role or will the Department continue to collect the data, as it does now, through the regions and the NHS Executive? 
 It would be useful to have some clarity on that. If CHI is to collect the data, I hope that the Minister will give us some assurances that it will be under an obligation in the public interest to publish that information at the earliest opportunity. 
 I am concerned that some data that the Department of Health collects through surveys that it currently undertakes is not always published. Quite recently, in an answer to a parliamentary question that I had tabled seeking information about the loss of nursing home beds between October 1999 and October 2000, I was told that—[Interruption.]

John Maxton: Order. There is a Division in the House. I am concerned about the amount of time we lose for these Divisions, so with the consent of Members and providing the Clerk is back, we shall resume in less than the normal quarter of an hour.
 Sitting suspended for a Division in the House. 
 On resuming—

Paul Burstow: I was questioning whether the Government would be as transparent as they ought to be about the provision of information. I cited the example of an answer that I received yesterday, which is published in Hansard today, in which the Department declined to publish information from a survey of nursing homes covering the year October 1999 to October 2000, on the grounds that that was not part of the usual national collection of statistics. It said that, as a consequence, the survey was merely intended to help Ministers to form a judgment about the local performance of the national health service. For that strange reason, it was unwilling to publish the information—the words used were, ``it would be inappropriate''. Perhaps that is the sort of answer that we shall get on such issues in future.
 Finally, there is tension in a system that is managed by criteria that are set at the centre, but that seeks to be flexible in relating to local circumstances. I am thinking of health improvement programmes in particular. To what extent will the Government try to ensure that local health authorities will be effective partners with local government and other stakeholders in the local health economy in delivering health improvement programmes that are fit for the purpose according to local circumstances? That is perhaps harder to achieve with national targets set at the centre: it is about trying to make the health improvement programme fit with what appears to be coming from the centre. 
 It would be useful if the Minister could say how that tension between local and national priorities will be resolved within the traffic-light performance management system. We certainly subscribe to the view that there is a need to have a performance system. We have some concerns about the linkage of resources to such a system, and in particular, about the impact on the morale of those who find themselves categorised in the red-light zone.

John Denham: I shall not repeat our earlier debate, but reply to some of the specific points that have been raised.The performance system that we have been discussing today, although it goes much wider than clause 2 is not about identifying and stigmatising failure. Rather, it is very much about rewarding and identifying success. The consultation paper that we published last week outlines a series of measures of greater freedom and autonomy that would be enjoyed by the best performing health authorities and trusts. At the same time, the Department would have the power to identify, intervene in and support organisations that are failing. My personal belief is that a performance regime should include incentives to encourage people to do better and provide the necessary support for failing organisations. Clause 2 is intended to help to achieve that.

Philip Hammond: I should like to make sure that the Minister did not inadvertently mislead anybody when he talked about greater autonomy and greater freedom. I believe he means that organisations that are graded green will have the autonomy and freedom that all have at the moment and those who do not achieve that status will lose some of the freedom that they currently enjoy.

John Denham: Clearly, the exercise of sending out the consultation document at the end of last week was just a waste of time, as the hon. Gentleman for Runnymede and Weybridge has not read it. It says that health organisations will have automatic access to discretionary capital funds without having to bid, greater freedom to decide on the local organisation of services, the ability to address the persistent failure of red-light organisations and lighter touch monitoring by the regional office. It refers to a series of other measures on which consultation is taking place, including ways of reducing progress monitoring and prescribed processes for service development, ways of introducing lighter touch routine monitoring, the ability to develop service strategies without regional office approvals and flexibility over land sales. It covers a whole series of measures which, compared with what is uniformly applied to all trusts today, would provide greater levels of freedom. Therefore, I stand by what I say.

Philip Hammond: For the sake of clarification, will the Minister make it clear to the Committee which level of traffic-light grading represents the current position, so that we can see which trusts and health authorities will lose some of their autonomy and freedom and which ones will gain?

John Denham: Those that are categorised as green-light trusts will enjoy enhanced autonomy, but I do not wish to suggest that that is not possible for those that are showing progress as yellow-light trusts. We want to have incentives throughout the system.
 The reason why we are consulting with the service on the document is clear. The process will be seen by the service as an attempt to identify the parts of the current management process that appear to be unnecessary hindrances, bureaucratic obstacles or time consuming exercises, which in well-run trusts could be done away with, in whole or in part, to achieve greater freedom. That is what the exercise is about. 
 I now refer to the specific issues that were raised. First, I was asked whether the grading and the allocation would be the result of a Commission for Health Improvement evaluation. In other words, would the Commission for Health Improvement categorise health organisations? That is not exactly what we intend. We intend that the trusts should be allocated into red, yellow or green categories by the regional office, against published criteria that have been set out and notified and that the Commission for Health Improvement should validate that process. It will require further work, however. We recognise the need for a double check in the system against favouritism, arbitrary decision making or simply wrong decision making. For that reason we would look to the Commission for Health to validate the process.

Philip Hammond: Will the Minister confirm that the Secretary of State will have no discretionary power to intervene in that process?

John Denham: The Commission for Health Improvement is set up as an independent statutory body and the process of validation would be part of its role. The hon. Gentleman knows that, in legal terms, a regional office the embodiment of the Secretary of State. That is a minefield, but the intention is clearly for the process to be validated by the Commission for Health Improvement to ensure confidence in the operation of the system.
 The second question was whether an organisation might appeal against its grading. We are open to considering the responses to the consultation document but we have not yet envisaged a formal appeal process. In our experience of the publication of performance assessment frameworks, when somebody appears to be performing particularly badly he or she almost always immediately rings up and says, ``Actually, the data that we sent and that you published was completely wrong; if you had used the right data we would have been okay.'' It is reasonable to expect that if a trust finds that it has been graded less well than it would have liked and that there are flaws in the published data, it will be able to discuss that with the regional office, but the emphasis is on dealing with an organisation's problems rather than engaging the service in a major formal appeals process. 
 The question of public scrutiny came up several times. The data that would be used, whether for the core objectives or the wider set of objectives in the performance assessment framework, will clearly be published data. The Department already publishes data through the performance assessment framework. The data being used for the assessment will therefore be in the public domain. 
 The hon. Member for Sutton and Cheam asked who would collect the data. The data are overwhelmingly information that is produced by the health service in exercising its normal management; as he knows, the health service generates far more data than is collected centrally and published. Data would be collected by the Department of Health but, as an additional safeguard, the responsibility for publication of the performance assessment framework data will be transferred from the Department to the Commission for Health Improvement so that the latter organisation has the opportunity to assure itself of the validity of the data being published. The existing route for the collection of the data is in practice the only sensible route and would continue to be used. 
 The final point raised by the hon. Member for Sutton and Cheam was about health improvement programmes. They are an important part of the planning process and we want health improvement programmes to reflect local as well as national priorities. In practice, many of the indicators that we have suggested for the performance assessment framework deal with the sorts of issues that one would expect to be the outcome measures of the health improvement programme. They do not necessarily specify how health improvement should be achieved but will look at the outcomes.

Philip Hammond: Once again, the Minister has sat down without answering the question that I have now asked four times: how many health authorities and trusts are expected to be graded red in the first wave?

John Denham: As I said in answering the hon. Gentleman's question when he first asked it, we have not set a figure for that—and, in response to the question from the hon. Member for Sutton and Cheam, nor have we run the data against the consultation document that we have put out.

Philip Hammond: Can the Minister explain why the Government have deemed it necessary to say that 25 per cent. will be graded green but not to make any estimate of the number that will be graded red?

John Denham: In the spirit of rewarding success and best practice and performance, we judged that it would be useful initially to state the number of trusts that we thought would make green-light status. We have been anxious to avoid the idea that first we thought of a number of failing trusts and we are now going to find out which ones they are. It fits with our philosophy of running a system, which encourages success and best performance.

Philip Hammond: I am sorry to press this point, but if the Committee is considering the way in which these arrangements will work, we have to understand whether we are talking about 20 per cent. or 0.5 per cent. Nothing that the Minister has said yet has indicated whether the red light is to be an exceptional measure for a seriously failing trust or whether it is to be a significant percentage of the total number of trusts and health authorities.
 In my view, it is impossible properly to evaluate how the system will work in the absence of that information. Perhaps other members of the Committee feel the same. Can the Minister give us any indication as to the expected order of magnitude? Does the Minister expect red-light organisations to represent 1 per cent. or 20 per cent? Can he at least give an indication of the numbers?

John Denham: No I cannot, for the reasons which I gave earlier. The traffic-light system, which we have been discussing, does not depend on clause 2 of the Bill. The discussion has been a useful platform for that discussion, but clause 2 is not required to implement the traffic-light system. It would be quite wrong to say in Committee, however helpful it might be to the hon. Gentleman, that we think that there will be a particular number of red-light trusts as it would affect the entire process.

Philip Hammond: The Minister did so for green.

John Denham: I have explained why we have not done it for green and I rest my argument. The hon. Gentleman will have to decide whether or not he agrees with me.
 Question put and agreed to. 
 Clause 2 ordered to stand part of the Bill.

Clause 3 - Supplementary payments to NHS trusts and Primary Care Trusts

Philip Hammond: I beg to move amendment No. 69, in page 3, line 15, at end insert—
 `(5B) If the Secretary of State makes any payment under subsection (5A) above he shall publish details of such payment and the reasons he considered it appropriate to make such payment.'.
 I jotted down in my notes that I would open by saying that I certainly did not intend to rehearse the same arguments again. In the light of our exchange over the past 90 seconds, I am tempted to revisit that thinking. It is incredible that the Minister is telling us that the Government have no idea at all on this issue, which is equally relevant and valid in the context of clause 3. 
 Most of the points that have been raised in the debate on clause 2, which deals with health authorities, apply equally to clause 3, which deals with NHS trusts and primary care trusts. The amendment, which requires the Secretary of State to publish details of payments that he makes and the reasons he considers them appropriate, once again seeks to put some transparency into the system. Under clause 2, the Secretary of State has the power to override the formula and give money to health authorities on criteria other than the funding formula, but in clause 3 the Secretary of State is allowed to bypass health authorities altogether and to pay money directly to trusts and primary care trusts. The issues that were raised in relation to health authorities therefore reassert themselves here and for trusts they are probably even greater. 
 The Secretary of State can make such payments subject to conditions. From reading the explanatory notes, it is clear that there might be specific conditions on how the money was to be used. The conditions might effectively passport the money going to a trust or a primary care trust to a specific purpose—perhaps to fund payments to members of staff. 
 In clause 3, the Secretary of State is taking powers to bypass the formula, bypass the health authority and even to bypass the trust or primary care trust by giving it money that could be subject to a specific requirement to use it for a single, designated purpose.

Michael Jabez Foster: What is the difference between that and Tory proposals to hand out even more cash directly to schools than have the present Government?

Philip Hammond: I am sure, Mr. Maxton, that you would not want me to elaborate on Conservative education policy, but the difference is that the Secretary of State has a specific power of direction to go behind the health authority, give the money to the trust and require it to be used for a particular purpose. I could launch a partisan discussion here, but I acknowledge that in certain circumstances everyone might agree that it was helpful for the Secretary of State to have that power. However, most right hon. and hon. Members would also agree, if they thought about it for a moment, that real problems of accountability arise in respect of the proper direction of substantial sums in an organisation as large as the NHS.
 We cannot endorse a degree of micro-management that would allow the Secretary of State to make discretionary payments to individual PCTs for a specific purpose—£20,000, for example, to hire an extra person of a certain description in a certain PCT in Northumberland. That is a step too far. The Secretary of State should not have such power: in any case, he could not use it effectively. The rationale of devolved authority in an organisation on the scale of the NHS is that the central machinery cannot be sensitive to the needs of local organisations and structures. Parcelling out small sums of money from the centre is highly inefficient because the costs of going through the allocation process are relatively high in proportion to the amount involved. 
 Those are our main concerns about clause 3. I have aired the issues comprehensively. The amendment is designed not to correct all the deficiencies, which would wreck the Bill, but to add a measure of accountability and scrutiny by requiring the Secretary of State to publish details.

Peter Brand: I am uneasy about clause 3 for several reasons. Currently there is a partnership between commissioning health authorities and trusts that deliver, in the case of primary care trusts, through secondary commissioning. The relationship is usually positive under that scheme and it is clear who does what.
 I am anxious about allowing the Secretary of State to fund trusts directly and bypass health authorities because it will undermine the process of co-operating locally to find the right way forward and lead to special pleading by the trust and the authority. It will leave the Secretary of State with directive powers to determine what happens in the locality. That may not be what the Government intend, but it is almost inevitable. 
 The hon. Member for Hastings and Rye (Mr. Foster) raised a relevant point in his intervention. I oppose the Conservative idea of bypassing local education authorities, because that denies the support that, for instance, village schools can get from their local education authority. However, at least the Conservatives have been honest about it by proposing to abolish a tier of administration and manage it directly, so saving costs. Essentially that is what their system would do. It is central management of schools, rather than devolution down to schools.

Philip Hammond: Would the hon. Gentleman also acknowledge that what is being proposed in the Conservative education policy is not that money should be allocated on a discretionary basis to individual schools, but that it should be allocated by virtue of performance?

Peter Brand: We are not discussing this matter in terms of education policy. However, there is a fascinating parallel in that there is a clear direction in the Government's enabling legislation towards directly managed trusts which are providers of services rather than commissioners of services. If that is the direction that the Government want to take, they will be wasting a lot of House of Commons time, as well taxpayers' money, by keeping both parallel systems going. It is important that the Minister makes it clear whether the provisions under clause 3 will be exceptional; whether pilots will be carried out, because of national interest and policy; or whether this will be a routine way of getting something delivered through a trust, bypassing health authorities. Given that that is unclear in the Bill and explanatory notes, it would be helpful if the Minister at least accepted amendment No. 69, because it would allow us to evaluate whether direct ministerial largesse in this instance was exceptional or would become routine.

John Denham: It is probably helpful in responding to the amendment to talk about the scope of clause 3. It may be optimistic to think that we will avoid a stand part debate; that will be entirely in your hands, Mr. Maxton.
 The provision will indeed enable direct payments to NHS trusts and PCTs. The power will be used for the direct improvement of the provider infrastructure in the trust, to enable provision of better services. This year, although we were not able to use that power, we have been able to make two allocations, of about £30 million each, to fund hospital cleaning. We have to accept that it was a direct initiative by central Government to bring about a rapid improvement in the quality of hospital cleaning. Members of the Committee will have to form their own opinion whether it is desirable that central Government should take an initiative in response to public concerns to bring about an improvement in hospital cleanliness outside, rather than simply leave everything to the local commissioning process. Our judgment is that that was the right initiative to take. 
 I must explain why, in order to do that, it would help to have clause 3 in the Bill. As has already been pointed out, at the moment payments to NHS trusts and PCTs as providers should be made only under the terms of a service agreement—in other words, in return for a service provided. Allocations go to health authorities or PCTs under the current arrangements for the commissioning of services. They are not appropriate for making payments to NHS providers—NHS trusts or PCTs—to reward staff performance, or necessary to improve facilities. 
 If we want to make money available direct to trusts to bring about higher standards of cleaning, we end up having to direct health authorities or PCTs as commissioners to make specific payments to trusts under a service level agreement. That is an onerous and laborious procedure. It involves the Department in determining the lead health authority or PCTs. It means aggregating amounts for NHS trusts accordingly, sending duplicate letters to health authorities, PCTs and NHS trusts informing them of their imminent funding, and adjusting health authority cash limits before making cash advances to health authorities and PCTs. 
 The point that needs to be understood is that, as we have shown this year on the money for hospital cleaning, it is perfectly possible for central Government and the Secretary of State to decide to undertake such an initiative. However, the legal route that has to be followed to get the money through the system to the place where the cleaning takes place is laborious. I believe that if we are making direct payments of that sort it is better to do it in a simpler way. Similar considerations might apply in the future to the performance fund that can be directed to trusts by the Secretary of State, through the health authority. We would be cutting out a fourfold duplication of effort and sometimes a considerable amount of elapsed time between central Government deciding to take an initiative and it actually arriving in the trust where the action is to be taken. 
 It is important to reassure the hon. Member for Isle of Wight and the Committee as a whole that we do not wish to undermine the role of commissioning. We created primary care trusts to strengthen the commissioning process. We have put in place, at national and regional levels, new arrangements for the commissioning of specialist services. Local commissioning decisions are now made more effectively by those who best understand local needs. 
 I recognise that there are occasions where it is reasonable and right for the Secretary of State to wish to bring about change at local level through direct funding to trusts. This provision provides us with the ability to do so. There will be differing views on whether that should be done, but my point is that the power is already in the commissioning arrangements to pass money directly. If one is going to take this approach, it is more efficient, effective and more transparent to do it in this way. 
 I can understand what the hon. Gentleman seeks to achieve. He wants to make sure that details of such payments are published and their purpose is apparent. There is a slight irony about this debate because, normally, the complaint from the Opposition is not that we secretly allocate money to the health service, but that we inadvertently announce it two or three times. To be accused of wanting to push money out to the health service and keep it a secret is a new experience. I do not think that there is any real danger of that happening. 
 Formal accounting procedures are already in place. We ask Parliament to vote the estimated expenditure of the NHS before the start of the financial year. We publish actual expenditure funded through allocations at the end of the year in the appropriation accounts of the Department. Financial accounts of NHS bodies are published after the financial year end and those include details of income and expenditure. Those arrangements provide a fair amount of information, but should that not be sufficient it is clear that this information will need to be provided on request, for example, in answer to a parliamentary question. I do not see the need to make this amendment.

Philip Hammond: Is the Minister giving the Committee an assurance that no such question will receive the answer that the data are not available, or collected centrally—a response with which all members of the Committee are familiar?

John Denham: That situation clearly arises where there is a local activity on which central data are not collected. In this situation, it is the centre making money available to trusts; therefore the centre, by definition, has the necessary information and the question would have to be answered.

Philip Hammond: We have scored something of a modest success by getting the Minister to place on the record that there we will be able to ask a specific question about the allocation of money to trusts and get a specific answer through the parliamentary question route. That is a rather tortuous process, given the number of trusts and PCTs; none the less, it is some progress.
 The point about the need for transparency has been made more than once. People need to know what is going on—not just Members of Parliament, but people in trusts and health authorities, so that they feel that they are treated equally. People in West Surrey health authority, for example, should feel they are treated in the same way as people in Durham health authority. The Minister, relatively unusually among his colleagues, represents a southern England seat and he may be familiar—[Interruption.]

John Denham: Just looking over my shoulder it would appear that at least 50 per cent. of the Labour Members of the Committee represent southern constituencies.

Philip Hammond: When I used the phrase ``the Minister among his colleagues'', I was thinking of the hon. Gentleman's ministerial colleagues. Although he is not likely to share this with the Committee, he may have the experience in the inner councils of Government of having to represent a view—which may or may not be correct—which is widely held in southern England, that in health funding matters there is a tendency to skew funding away from southern England towards northern England. This morning, I gave the example that a patient waiting for elective surgery in my constituency is nine times more likely to be waiting for 12 months or more than a patient waiting for elective surgery in the Prime Minister's constituency. The statistics go on.

Ian Stewart: I would be happy to swap the heart problems suffered in my constituency with those in the hon. Gentleman's. Does he not realise that the only way to run a proper health service is to address the greatest need first?

Philip Hammond: Would the hon. Gentleman care to comment on the need of patients awaiting elective surgery in my constituency compared with the need of similar patients awaiting elective surgery in the Prime Minister's constituency? They are nine times more likely in my case to wait 12 months or more. That statistic is even more shocking than it appears on the surface, because in the West Surrey health authority area more than 50 per cent. of all elective surgery is carried out privately. Taking that consideration into account, and bearing in mind the costs faced by the authority, the shortfall of funding for West Surrey is even more shocking.

Ian Stewart: The hon. Gentleman does the Committee no service when he tries to give specific cases from his own constituency, having made nonsense general statements such as ``the north of the Country is better off than the south''. Of course each area has its serious problems. That is why the people of this country elected a Labour Government and will keep that Government in power. They will do so to ensure that provision is made on a strategic and fair basis.

Philip Hammond: The hon. Gentleman does the Committee a disservice by reducing the debate to this level. I was saying to the Minister—I am sure that in private he will confirm that he is aware that this happens—that, rightly or wrongly, many people in the south of England believe that health funding has been skewed away from their areas into other areas. If the hon. Member for Eccles (Mr. Stewart) looks at debates in the House of Commons over the past couple of years, he will see that Member after Member has asserted that belief.
 Several hon. Members rose—

Philip Hammond: I will not take any more interventions. The purpose of my comments has been to reassert the reasoning behind this series of amendments which has sought to make information available about the basis on which money is distributed. To put it at its most neutral, the amendments encourage the Government to choose mechanisms that would reassure people that money is allocated on a proper, fair and equal basis. That would disperse any lingering suspicion that the money available for distribution under the mechanisms of clauses 2 and 3 could be distributed in a way that was not fair or even-handed.
 I accept the Minister's assurance that he does not intend to cover up any of those matters. In due course, he may feel able to go further than he has today in reassuring the Committee about the availability of information in the public domain. However, our point has been made, and I beg to ask leave to withdraw the amendment. 
 Amendment, by leave, withdrawn. 
 The Chairman, being of the opinion that the principle of the clause and any matters arising thereon had been adequately discussed in the course of debate on the amendment proposed thereto, forthwith put the Question, pursuant to Standing Orders Nos. 68 and 89, That the clause stand part of the Bill. 
 Question agreed to. 
 Clause 3 ordered to stand part of the Bill.

Clause 4 - Public-private partnerships

Desmond Swayne: I beg to move amendment No. 72, in page 4, line 6, at end insert—
 `(3A) The Secretary of State shall publish not later than the 31st December in each year an audited statement of his assets and liabilities (including contingent liabilities) under arrangements made under this section at 31st March in that year.'.

John Maxton: With this it will be convenient to discuss amendment No. 73, in page 4, line 27, at end add—
 `(7AA) The Secretary of State shall publish not later than the 31st December in each year an audited statement of his assets and liabilities (including contingent liabilities) under arrangements made under subsection (7A) above at 31st March in that year.'.

Desmond Swayne: I rise to speak to amendment No. 72, tabled under my name and that of my hon. Friend the Member for Woodspring (Dr. Fox). When I put my name to that amendment, I expected that my hon. Friend would move it. However, events have intervened. Labour Members who have unjustifiably accused me of verbosity will be reassured that I will, of necessity, be brief.
 We support the principles of partnership and involvement with the private sector that underlie the clause—indeed, we have a measure of enthusiasm about them. That is my understanding, at least, but if I have got it wrong my hon. Friend the Member for Woodspring will correct me. 
 The Bill allows the Secretary of State to 
form, or participate in forming, companies to provide 
finance and guarantees to the bodies in question. Our amendments would create the requirement for the audit of the assets and liabilities that the Secretary of State will acquire or incur under the opportunities that arise for him in the provisions of clauses 4 and 5. That strikes me as perfectly sensible—pure common sense, entirely uncontroversial. Therefore, I have every expectation that the Minister will accept the amendments. 
 Members of the Committee will understand, however, that a concern underlies that requirement. The track record of Government investing in the private sector is long and inglorious. I will not try your patience, Mr. Maxton, or use the Committee's time to detail any of that history—the history of picking winners, for instance. I am sure that it would not prove controversial if I were to do so, however, because we are now governed by new Labour, which accepts the case that mistakes were made. Government Members would now take great care before putting in a Bill provisions that enabled such a process to begin again. 
 The amendments would require a quantifying of the liabilities that the Secretary of State incurs and the finance that he puts at risk when he invests in companies. They would require the Secretary of State to measure the liabilities into which he enters and to publish them annually, making public the contingent liabilities and off-balance sheet risks. That begs the question as to how one measures such contingent liabilities. In my former occupation in the Royal Bank of Scotland, I specialised entirely in developing technical solutions, finding algorithms and computerising them to calculate precisely the values of those contingent liabilities. 
 In the past, general practitioners have financed their own premises, borrowing commercially and obtaining reimbursement of the rental from the health authority by the cost rent, or notional rent schemes. That system encouraged general practitioners to work with health authorities to identify third-party developers to design, build and finance premises, and then let them to general practitioners and trusts at a market rent. The national health service does not want a lease longer than 15 to 20 years, however, and I would not blame it for that. Given the 10-year plan, it would be too much to expect the NHS to enter leases for more than 15 or 20 years. Indeed, many commercial undertakings would not wish to do so.

Peter Brand: Will the hon. Member explain why the Conservatives were so enthusiastic about the Government's private finance initiative projects, which tied the health service to contracts of some 60 years with a 30-year break clause?

Desmond Swayne: As the hon. Member says, no such contracts were entered into under the previous Conservative Government, precisely because of the terms and conditions that applied. Only as a result of those conditions being changed do we now have private finance initiative contracts.
 The difficulty is that the cost of purchasing and developing the site cannot be amortised at a market rent set by the district valuer. The commercial developer of such sites therefore seeks to make the enterprise profitable. Consequently, if the NHS does not wish to renew the lease, the residual value of the site falls to him. 
 That is no problem in a constituency such as my own, where developers are queueing up to build on redundant primary, secondary, and—regrettably—intermediate care sites, which are largely privately owned. Recognising the residual value of a site after a development's natural life has expired is not a problem. There is, however, a problem in inner cities and rundown areas in other parts of the country, where initiatives such as this are most required so that modern and desirable premises for the NHS may be provided. Market rents are often too low to justify such a development in the first place, although since 1999 the district valuer has had some scope to deal with that problem. The difficulty arises because there may be no alternative use for the site if the NHS decides not to renew the lease. Therefore, the developer attempts to obtain a longer lease, or seek some guarantee with respect to the residual value of the site. The alternative is to seek agreement with a non-commercial NHS partner to purchase the land, or pay in part for the development itself, which would change the economics of the entire enterprise. 
 The economic reality is that in areas where the Department of Health wants new premises, but where there is no real demand for modern commercial property, the only way to develop the site is by underwriting some of the developer's costs. The advantage of that over the health authority simply commissioning and owning the project in the traditional way is not immediately clear. The private sector is able to accept the risk of managing a project. However, it is not good at or even willing to accept risks such as those that will be incurred as a consequence of developing new general practice premises in areas that are largely represented by Labour Members. To return to our previous discussion, Labour Members might justifiably say that they represent all areas, but I am sure that that imbalance will shortly be corrected in the months, if not weeks, to come. 
 If public borrowing is to be avoided, the Government will have to be prepared to enter into deals with the private sector that will have a significant potential cost, or contingent liability, in 15 or 20 years' time. When the leases expire and the residual value of the sites is not realised by the developer, the contingent liability, which the Secretary of State will have had to have underwritten in order to initiate the project, will fall due. It is only prudent to measure those liabilities as they are acquired and report on them every year to find out precisely what the Secretary of State is entering into as the years progress. That strikes me as entirely proper. 
 I have one or two other anxieties about the clause, largely as a consequence of an excellent document furnished by my right hon. Friend the Member for North-West Hampshire (Sir G. Young). However, as I would not want to divert the Committee's attention from these focused amendments, I shall leave those remarks to an even more focused debate on, if you are willing, Mr. Maxton, clause stand part.

John Denham: As the hon. Gentleman, who has just made his first contribution from the Opposition Front Bench, has suggested that he would welcome a clause stand part debate, I shall keep my remarks narrow and relate them to the amendments.
 The hon. Gentleman makes the simple proposition that the assets and liabilities arising from the clauses relating to public-private partnerships and income generation should be in the public domain. I assure him that they will be. The amendments are unnecessary. Any assets or liabilities, including contingent liabilities, will be disclosed in the relevant annual accounts. Any assets or liabilities held by the Secretary of State will be disclosed in the Department of Health's resource accounts, which will be published in compliance with the Government's resource accounting manual. 
 In the case of clause 4, for a health authority or PCT, or clause 5, for NHS trusts, any assets or liabilities would be disclosed in their annual accounts, which they are required to publish under the National Health Service Act 1977. In addition, any public-private partnership set up under the provisions as a limited company will be required to produce and publish annual accounts in compliance with the requirements of the Companies Act 1985. Those accounts will detail all assets, liabilities and recognisable contingent liabilities. 
 NHS and Department of Health bodies that want to set up companies to exploit intellectual property will have to comply with guidance set out in a financial framework, which will be published as official departmental guidance. Monitoring arrangements on intellectual property in the NHS that are already in place supplement existing accounting arrangements in the annual accounts of the bodies involved. 
 The purpose of the hon. Gentleman's amendment is achieved by existing arrangements for disclosure. Issues surround how the Secretary of State's liability might be limited through the use of limited liability companies for the proposed public-private sector partnership and how risk over the exploitation of intellectual property rights is managed in clause 5, but it might be better to return to those matters in more detail later.

Desmond Swayne: The Minister's comments offer a measure of reassurance. I assure him that our concern has been prompted by a desire to ensure that the Secretary of State is not ripped off. I am convinced that we have the best civil service in the world. It will, of course, advise the Secretary of State with all its expertise, but with all due respect, that expertise is not, or has not been in the past, commercial expertise. It is undoubtedly a jungle out there. The partners with which the NHS negotiates will seek precisely the guarantees that I described.
 However, having heard what the Minister said about the way in which the contingent liabilities will be measured, I beg to ask leave to withdraw the amendment. 
 Amendment, by leave, withdrawn.

Paul Burstow: I beg to move amendment No. 23, in page 4, line 15, at end add—
 `(6) For the purpose of subsection (1) above, the Secretary of State shall make regulations to establish and require systems of operation that safeguard patient interests, in particular to ensure adequate care standards, accountability and transparency.
 (7) Before making any regulations under subsection (6) above, the Secretary of State shall consult such bodies who represent the interests of those likely to be affected by the regulations.'.
 The amendment is designed to elicit assurances from the Government about how we can ensure, in the context of public-private partnerships, that patients' interests are safeguarded at all times. It would ensure that commercial interests were not put ahead of patient interests. The amendment would place a regulation-making power in the Bill, with a duty to consult prior to the publication of regulations about arrangements to ensure that there was transparency in dealings involving public-private partnerships in terms of how care standards are safeguarded and the information that is provided. 
 We are concerned that, beneath the cloak of commercial sensitivity or confidentiality, issues that are of public interest, that the public have a right to be informed about and that go to the heart of safeguarding patient interests will not be in the public domain. We therefore seek a mechanism that will enable the House further to scrutinise arrangements for monitoring and reporting on the operation of public-private partnerships set up under the clause. 
 The explanatory notes make it clear that the Government intend to use that power in the first instance to establish an organisation called NHS Local Investment Finance Trust—NHS LIFT—which is not about the construction of many lifts in health service buildings, but about investing in new primary care premises. Perhaps some will have lifts. 
 I hope that the Minister can answer some questions that seem relevant to the way in which the public-private partnerships that provide the premises might operate. First, can he tell us what the incentives will be for private companies to invest in under-doctored target areas? Secondly, are there any implications for the control of such premises through the involvement of private partners? Thirdly, will private companies that become involved in the arrangements have any say over how and what care is provided in establishments built through that mechanism? 
 I hope that the Minister can also say a little about whether the entities that will be created—the public-private partnerships—will in all cases work under a charging regime and the same employment and service conditions that pertain in the NHS. It appears that there is a question mark over whether that is the case, so we would like the Minister to give us some assurances on that. 
 The amendment is fundamentally about the need to ensure that there are procedures to allow the House to conduct scrutiny and to allow proper consultation by Ministers. There must be a system that ensures that patient interests are safeguarded when public-private partnerships bring in new money and that they cannot use commercial interests solely as a device to avoid public scrutiny.

John Denham: I agree that the interests of the patient must always be paramount, but I am not convinced that the amendment is necessary to safeguard those interests, because the reality is that the existing obligations will apply where the Secretary of State or NHS bodies use this power. The power represents an additional way of improving facilities that are available to those who are providing NHS services and does not provide any excuse for ignoring patients' interests. All the current regulatory checks and financial and legal requirements that exist within the NHS will continue to apply. For example, the legal duty of quality of care on commissioners and providers applies, as will the guidance on clinical governance issued to the service. The role of the Commission for Health Improvement in looking after patients' interests will apply.
 I can reassure the hon. Gentleman that the patients' interests will be paramount, and just because a public-private partnership is used to improve GP premises there is no reason to believe that that should lead to any diminution in the quality of patient care, any more than it would do if a purely private arrangement were entered into, or if those facilities were provided directly by a health authority through a health centre. The issue that the hon. Gentleman raises is a fair one, but because the checks and the obligations on the provision of services apply as they would in any other circumstance, there is no need to accept the amendment.

Paul Burstow: Can the Minister assure us that, so that those checks and obligations actually operate in the interests of the patient, there will be no need for those who act on behalf of patients to scrutinise the system at a local level? Does he believe that there will no need for them to have to navigate their way around the system to gather the various aspects of the information of the various checks that he was outlining?

John Denham: The point is that services that are provided through new primary care facilities provided by NHS LIFT, and the issues that arise from the point of view of patient service, are exactly the same as if those premises had been directly provided by an NHS trust or a health authority or through a private arrangement made by the general practitioner: the patient is in the same position. Later, we will discuss a new system of patient scrutiny. That will be relevant, but only in the sense that we are looking to that to cover primary care in all its settings, including those that are provided here.
 The hon. Gentlemen asked what incentives there are to invest in under-doctored areas. NHS LIFT will deliver good-quality primary care facilities because the nature of public-private partnership is that it can offer economies of scale and economies of financial skills. There will be an ability beyond that which an ordinary GP could normally handle to attract pharmacists and other health investors who want to become partners in the venture. It could be possible to raise additional capital to provide other facilities on a site such as flats or retail developments. There will be economies of operation for NHS LIFT, in that it would be able to tender for local authority or other personal social services facilities at the same time as providing health care properties. It might be able to offer other health care provision, such as minor injury units or intermediate or step-down care beds. Because of the involvements of the Department of Health and the NHS, we hope that it would be able to take advantage of the higher credit rating that the Department is able to bring to the company. 
 The acid test is that there is significant interest in the private sector in taking part in NHS LIFT. It is clear that it is the under-doctored and deprived areas in which we wish to invest, and there seems to be no shortage of potential private sector partners to take part in it. 
 The hon. Gentleman asked a number of questions, which hung around the idea that the nature of the services would be determined by the fact that this was a public-private partnership. I know that he does not agree with me, but it is important to stress, as we do with PFI, that this is an alternative route to making the provision; it is not an alternative provision. It is exactly the same with LIFT or any other use of this clause to develop a public-private partnership: it gives us an alternative means of achieving the same outcome for patients. We do not expect to cover all the investment that is necessary in primary care premises. 
 The hon. Member for New Forest, West referred to the existing arrangements for funding GP premises. Those will continue, but there are areas of the country where LIFT will not operate, certainly in the first instance, and where alternative routes which have been tried, tested and worked will continue.

Paul Burstow: The Minister began his response by saying that he was not convinced of the need for the amendment. I have not been convinced by his arguments as to why it is not necessary to place specific requirements in the Bill. We have not gone down the route of a detailed and prescriptive amendment, because that that would have invited him to advance arguments with which I am familiar in Committees. Nevertheless, we gave the Government the scope to advance the cause of patients' interests. We would like to take stock of what the Minister has said. I beg to ask leave to withdraw the amendment.
 Amendment, by leave, withdrawn. 
 Question proposed, That the clause stand part of the Bill.

George Young: I am grateful to you, Mr. Maxton, for calling me and observing a semblance of rank in these matters.
 It is ironic that clause 4 of the Bill embraces the private sector in comparison with a rather more narrowly drafted clause which is perhaps more notorious. Nothing shows the change that has taken place in the Labour party over the past 30 years more than the fact that we have clause 4 of this Bill, whereas the last time I served on a Standing Committee under a Labour Government nearly 25 years ago we had a Bill that phased out pay beds from NHS hospitals—``The private sector must not be allowed to infect the NHS and must therefore be driven out.'' It is interesting to contrast that philosophy with paragraph 11.2 of ``The NHS Plan'', which reads: 
 For decades there has been a stand-off between the NHS and the private sector providers of health care. This has to end. 
Hear, hear to that. However, who is responsible for the stand-off? 
 On clause 4, there are a number of issues on which the Minister touched on which I should like to press him a little more. When the last Government were negotiating PFI deals, I had no idea that, sitting on the other side of the table, representing the hard-nosed bankers, was my hon. Friend the Member for New Forest West. How delightful it is to have him on one's side now. When the Minister explained what would have to be declared, he said that where the Secretary of State gave a guarantee, which he can do under proposed section 96C(2b), it would be declared in that year that it was made. Will he confirm that? The Secretary of State for the Environment, Transport and the Regions made a statement about the channel tunnel rail link which involved a Government guarantee. I think I am right in saying that, in those circumstances, that would score as public sector expenditure only if and when the guarantee was called. Will the Minister confirm that what he has said—that where the Secretary of State provides a guarantee, it will be declared at once—is consistent with the line that the Secretary of State for the Environment, Transport and the Regions took with the channel tunnel rail link? 
 Under proposed section 96C(1), the Secretary of State may form companies. Do the Government intend having a majority stake in any of those companies, or is it envisaged that they will have a minority stake, which would be the normal pattern? 
 Will the Minister clarify what appears in ``The NHS Plan''? Paragraph 4.11 refers to new local surgeries, which is what the clause is about. It states: 
 The NHS will enter into a new public-private partnership within a new equity stake company—Lift—to improve primary care premises. 
It continues: 
 As a result of this NHS plan, up to £1,000 million will be invested in primary care facilities. 
Does he really envisage that £1 billion will be spent through LIFT? If so, that is a substantial amount. If not, will he say what percentage of that £1 billion will come through LIFT, and whether that is on top of what was planned anyway, or is simply refinancing something that was to be provided in any event? 
 Will the Minister explain more about the decision-making process? If, as I envisage, the Government hold a minority stake and the private sector the majority stake, how can the Minister encourage investment in the more deprived parts of the country, which the private sector has not yet reached? What dialogue can the Minister engage in to encourage the drift of investment? Will the Secretary of State put on the table what is necessary to persuade the private sector to go there, or does the Minister envisage an alternative form of dialogue to achieve that? 
 I do not wish to prolong the debate. I welcome the clause and am trying to establish how it fits with section 96 of the NHS Act 1977. It does not fit at all, because section 96 has four subsections and the clause refers to section 96C. I understand that the only way to make sense of it is to refer to the unwieldy document before all members of the Committee. Out of interest, I examined section 97, which printed 20 lines of an Act, but crossed every single line out. I wonder what function was served by that exercise in bureaucracy. If the Minister can shed some light on the operation of the clause, I would welcome it even more enthusiastically than I have so far.

Desmond Swayne: It is a great pleasure and honour to follow my right hon. Friend and quite proper to have given way to his rank. I shall not repeat any questions that he asked more eloquently and intelligently than I could, but ask one additional question. Insofar as the clause enables the Secretary of State to be a participant in the formation of companies, how will it be affected by EU purchasing and procurement rules? I look forward to hearing the Minister's response.
 My right hon. Friend the Member for North-West Hampshire provided me with a brief from the Democratic Health Network—an organisation of 80 members, the majority being local authorities, but primary care groups and trusts, community health councils and trade unions are also involved. It seems that clause 4 has not been universally welcomed. The brief points out: 
 This short clause allows for a radical change to the way in which NHS services and facilities are financed. If the provisions in the clause were exploited to their full extent, most of the NHS could be financed through PPP. It will affect service users, patients, employees and wider communities. It is likely to be challenged by those who believe that public private partnerships are a ``back door'' way of privatising the NHS and neither provide value for money nor are sufficiently accountable. 
The brief goes on to state the deep concerns of many people about the clause. Of course, I do not share those concerns. The Conservatives support the principles behind the clause, but it would be remiss not to have drawn the Committee's attention to those concerns. 
 In some ways, sitting in Committee today has been a surreal experience—a feast without Banquo's ghost. This morning, we had the spectre of health authority boards being dismissed and replaced entirely by the private sector—a spectre that the Minister failed to dispel. This afternoon, provisions on new, exciting arrangements with the private sector are being spelled out in the clause, yet we have not heard a peep from Labour Members. Perhaps that is a consequence of the ruthless way in which those who participated in the Second Reading debate have been excluded from the Committee. I leave hon. Members to think about that.

Lorna Fitzsimons: The hon. Gentleman knows that some of us spent most of our time in the corporate sector and have therefore no problem working, or identifying the excellence, within it.

Desmond Swayne: That begs the question, where was the hon. Lady on Second Reading? Others, who were not quite so involved with the corporate sector to which she so lovingly refers, made their feelings plain. It would have been interesting to hear those views reflected in the Committee. I am disappointed that a voice has had to be given to them by Opposition Members. Perhaps it is worth reflecting on that.

John Denham: I shall deal directly with the series of questions raised by the right hon. Member for North-West Hampshire.
 On when the guarantee would be declared, my understanding is that it would form a contingent liability and would be declared in the financial year in which it was made. However, I am not an expert in that area. I shall look further into whether it scores as public expenditure in that year or only the year in which the guarantee was actually caused. I shall write to the right hon. Gentleman and copy the letter to members of the Committee. 
 It is certainly our intention to take a minority stake in LIFT, as the Secretary of State, in partnership with Partnerships UK. We believe that LIFT will be able to produce £1 billion over the period that we have set out. That will make a major contribution towards the planned refurbishment of primary care premises and the development of new premises. It is our intention that the existing streams of funding will continue at the levels which are available, so this will not become a sole or exclusive route to the refurbishment of GP premises. 
 As for the ability to attract LIFT into the areas where it is needed, clearly the Secretary of State has a number of tools at his disposal, including the shareholding in the company and the NHS resources that could be put into, or that already exist, within areas. A planned approach to the refurbishment of a number of different premises enables us to bundle together a variety of different properties and development opportunities in one place in a way that most purely private sector companies would find difficult to achieve. 
 On section 97, I apologise if the document is hard to read, but as we discussed on the first day, my officials have made strenuous efforts to be as helpful as possible to the Committee in having a consolidated version of the legislation. I noted with interest the comments made by the hon. Member for New Forest, West on the Democratic Health Network. I should not mislead the Committee: we have done this primarily to get LIFT under way, but it is possible to envisage areas where significant capital investment would be required in the NHS and where a similar model could be used in the future. 
 Question put and agreed to. 
 Clause 4 ordered to stand part of the Bill.

Clause 5 - Income Generation

Question proposed, That the clause stand part of the Bill.

Desmond Swayne: I have some questions for the Minister on clause 5 which essentially gives the Secretary of State the same powers with respect to income generation. Will the hon. Gentleman spell out precisely the ways in which he sees that taking place? I should be interested in his analysis of the extent to which he expects the NHS to be able to export its management skills, certainly in the short term and in ways that he believes will be attractive to the private sector.

John Denham: The hon. Gentleman asked about management skills. The primary intention of the clause is to enable the NHS and Department of Health bodies to exploit intellectual property in innovation generated by staff, essentially through the development of so-called spin-out companies, in the development of new pharmaceuticals, medical procedures or devices and so on. At the moment, we can achieve that only by licensing. In some situations it cannot be achieved, for example, where there is no obvious licensee or further development is necessary. In such cases, the spin-out company route is needed so that the new treatment can be brought in for the benefit of patients. A spin-out company will be formed by bringing in outside funding without further investment by the NHS or the Department of Health. The previous work done to develop innovation gives the NHS or the Department of Health body its shareholding.
 Without going into detail, we must recognise that we need clear procedures for managing risk with spin-out companies. We intend that, in all proposals, approval of a business case by officials acting on behalf of the Secretary of State will be required. The proposal is very much in line with wider Government policies for the successful development and exploitation of intellectual property rights.

Desmond Swayne: Would the remarks made by the right hon. Friend the Secretary of State about the possibilities of marketing occupational health schemes to the private sector come under the aegis of the clause?

John Denham: My understanding is that the development of NHS Plus, the organisation envisaged in the NHS plan to market occupational health services, would not require use of the powers, but I acknowledge that the provision goes wider than our specific aim of developing the exploitation of intellectual property rights. It might be used in several other ways to provide a flexible or different means of income generation.
 Question put and agreed to. 
 Clause 5 ordered to stand part of the Bill.

Clause 6 - Terms and conditions of employment by health service bodies

Philip Hammond: I beg to move amendment No. 70, in page 5, line 15, leave out `and any directions given' and insert `made'.

John Maxton: With this it will be convenient to take amendment No. 71, in page 5, line 40, leave out `and any directions given' and insert `made'.

Philip Hammond: I shall address the amendments tightly. The wider issue involved is best dealt with in a short clause stand part debate. The amendments would remove the reference to directions so that the Secretary of State could make regulations, but not directions. My understanding—I am sure that the Minister will helpfully correct me if I am wrong—is that regulations under the provisions of the National Health Service (Primary Care) Act 1977 would require a statutory instrument to be laid. They could be debated in Parliament, whereas directions are given by the Secretary of State without the necessity of or possibility of any form of parliamentary scrutiny. The amendments would simply ensure that, where the Secretary of State interferes in matters such as the terms and conditions of employment used by primary health care trusts or health authorities, he does so in a way that is transparent and scrutinised by Parliament.

John Denham: As the hon. Gentleman said, the amendments would remove the power to make directions in relation to employment practices but would leave intact the power to make regulations. The core issue is whether there are circumstances in which it would be appropriate or better to use directions rather than regulations.
 We are talking about keeping both options open. To give an example, we are working with NHS staff organisations—that is the primary aim of the clause—to design a job evaluation system to ensure that a modernised NHS pay system respects the principles of equal pay for work of equal value. If the design is successful, and the scheme with all its elements is agreed, it will need to be implemented consistently throughout the NHS. 
 We could use regulations or directions to ensure that all NHS employers use the agreed job evaluation scheme, which is at the heart of the equal pay for equal value system. However, should problems arise over detailed interpretation in particular locations, we may need the flexibility to deal with the matter by direction. We would rather not have to publish enormously detailed regulations that covered every eventuality because we did not have the power to make directions in specific cases. 
 Governments have long recognised that in the health service there are times when regulations are appropriate and times when directives are appropriate and it is preferable for the Secretary of State to have the flexibility to choose between the two mechanisms, as necessary.

Philip Hammond: I am not entirely convinced by the Minister's argument. I can, of course, see the attractiveness to the Secretary of State of having the power to give directions, because they are not subject to scrutiny or indeed to publicity. However, I think it would be convenient to the Committee if I seek leave to withdraw the amendment and continue the substantive debate.
 Amendment, by leave, withdrawn. 
 Question proposed, That the clause stand part of the Bill.

Philip Hammond: I shall attempt to be brief. The undisguised essence of this provision is to maintain a nationally directed pay system.

Hilton Dawson: Hear, hear.

Philip Hammond: The hon. Gentleman shouts, ``Hear, hear,'' from the Back Benches, rather confirming everything I believed and performing, as he often does, in the stereotype role in which my mind has cast him.
 We have in the national health service a productive organisation. It is not merely a body that performs the public function of procuring access to health care and ensuring that it is available free at the point of need. It is also the virtual monopoly provider of health care—probably the single most important good that this economy produces. The NHS produces just under 6 per cent. of gross domestic product. It is a very large, productive enterprise, with 1 million employees. 
 The Government seem to believe that the best way to run such an enterprise is as a single structure. There is no example anywhere in the world of a productive organisation with 1 million employees producing the equivalent of nearly 6 per cent. of our GDP. Even organisations on a much smaller scale in the commercial world operate on a properly devolved basis. I will not bother to pursue the Secretary of State's assertion to me on Second Reading, recorded in Hansard, that the Chinese army ranked as such a productive organisation and should be considered as a good example. I invite the Minister to look that up. 
 Whether it is a good or bad thing to want to put in place a single national pay and conditions structure, it is likely to prove a futile exercise. The Government have embarked on a process of proposing paying cost of living supplements beyond the London weighting area. I represent an area just outside London and I will be a grateful recipient of some modest additional assistance towards the great challenge of recruiting and retaining NHS and other public sector staff in that area. I have already been on the receiving end of an outburst from NHS staff in Dorset who will be excluded from these arrangements, yet, as many hon. Members will know, housing in parts of Dorset—Poole, for example—is extremely expensive. 
 That is not a criticism of the Government's proposal, but simply an observation that, wherever one draws lines, artificially from Whitehall, one creates another problem. If the Minister decides tomorrow to include Dorset, the problem will be the next county—my geography of the south-west is not too hot.

Desmond Swayne: My constituency straddles that boundary and I have constituents living opposite each another in the same street who are affected differently because one is employed in Dorset and the other in Hampshire.

Philip Hammond: My hon. Friend emphasises our problem. If one takes a rational and sensible approach to the provider side of the national health service—not its function in ensuring equitable distribution of the availability and access to health that it is free at the point of need, but its more nuts and bolts function as a producer of health care—one must realise that its future lies in devolving more power from the centre and acknowledging the different conditions that obtain in different parts of the country. Self-evidently, a nurse living in Dorset will have higher living costs than a nurse living in rural Northumberland. Until the NHS can offer local structures and sufficient flexibility to take those factors into account, as every commercial organisation must do to survive, those recruitment and retention problems and the problems that NHS staff in relatively expensive areas on relatively modest salaries face will persist.
 The Government are going precisely the wrong way in seeking regulation-making or direction-making powers to determine the way in which every health authority and every primary care trust and NHS trust in the country deals with its staff. There has to be scope for flexibility if we are to succeed in maintaining, retaining and recruiting the necessary work force in all parts of the country. It cannot be a coincidence that, reversing the trend of the 1950s and the 1960s, the trend in large commercial organisations in the past three decades has been to decentralise power and authority over such decisions and to recognise that production units must operate semi-autonomously. The proposal is a retrograde step and gives the lie to the proposition that this is a decentralising Bill.

Adrian Bailey: Will the hon. Gentleman acknowledge that, by advocating extra rewards and remuneration for people in high value areas, which are likely to be high value because they offer superior amenities to those in inner cities, he is promoting a course of action that would exacerbate the problems of inner cities in recruiting staff for the health service?

Philip Hammond: In fact, the inner-city areas often have the high property prices and the high cost of living that cause NHS staff such problems.

Adrian Bailey: Not in the black country.

Philip Hammond: The hon. Gentleman may be aware that we are in the greatest inner-city area in the United Kingdom. He should get on the tube tomorrow and pop down to talk to people in NHS trusts in east London about the problems of recruiting and retaining staff on NHS salaries. If he does so, he will understand the problems caused by the relatively high cost of accommodation in that area.
 There is no blanket solution and that is precisely why I have great fears about the Secretary of State in Whitehall trying to decide the NHS pay and condition structure across the whole country. It is the wrong direction to take; all modern commercial and organisational experience is against centralising power and making single sets of rules and decisions apply across a 1-million strong, geographically disparate organisation. Whether we like it or not, the cost of living varies enormously in different parts of the country and the bottom line is that people on NHS salaries who live in areas with a low cost of living have a much higher quality of life and standard of living than those in areas where the cost of living is high.

John Denham: The hon. Gentleman may benefit from reading the proposals in ``Agenda for Change—Modernising the NHS Pay System'', which we are negotiating with the unions. It provides precisely the right balance between the national framework for employment, which the clause will ensure is followed in every trust, and the local flexibility needed by individual employees in the NHS.
 The problems are an inflexible employment structure, even on existing national Whitley contracts, a working week that ranges from 35 to 39 hours and big variations in payments for unsocial hours. That makes it difficult to introduce team working and to break down demarcations between professions, both of which are essential to the modernised NHS. The previous Government dealt with the problems by sweeping away such considerations and allowing full local contracts. However, in practice there is an even more complex and inflexible system at local level. That is the impetus for change in the NHS suggested by the hon. Gentleman's theories. 
 Our pay modernisation proposals envisage local flexibility within a consistent national framework. For example, in the current negotiations we want NHS trusts to be flexible in assigning jobs, but there will be a consistent national system for allocating them to a pay band. The exact point within a pay band to which someone is allocated should take into account local market forces and factors of the type we discussed. The right way properly to remunerate a flexible work force is to agree a national framework with NHS staff representatives, but to allow local flexibility. That must be part of our agreement, but we do not have the power at present to ensure that those employment conditions apply consistently in every trust in England. That is what the clause would provide. 
 Question accordingly agreed to. 
 Clause 6 ordered to stand part of the Bill. 
 Further consideration adjourned.—[Mr. Jamieson.] 
 Adjourned accordingly at thirteen minutes past Seven o'clock till Thursday 25 January at half-past Nine o'clock.